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8/27/14: Reuters analyzes the run-up to Brazil’s upcoming presidential election and consults Eric Fine. According to Fine, candidate Marina Silva “passes the message that she would be the country’s president and not its chief economist…But because of Brazil’s economic problems, the situation may require someone who’s more tested.” View article »
8/9/14: Barron’s discusses the recent performance of several investments that contain exposure to Russia and consults Eric Fine on the outlook for emerging markets bonds. "Russia is such a big part of the [JPMorgan Emerging Markets Bond] index that most investors satisfied themselves with underweight positions. But what if they all decided to go to zero weight after the sanctions?"View article »
7/30/14: Investment News asks investment experts to weigh in on the implications of Argentina’s default. According to Eric Fine, “It [Argentina] offers good upside relative to the downside. We want to have exposure.” View article »
6/10/14: InvestmentNews filmed on-the-ground interviews with portfolio managers at the Pershing INSITE 2014 conference to learn their ideas on maximizing yield in the current market environment. According to Eric Fine, who recommends considering emerging markets, “If they’re [investors] looking to emerging markets for yield, it should be in unconstrained form.”View article »
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By: Eric Fine, Portfolio Manager
The Fund’s biggest winners were Argentina, Vietnam, and Paraguay, in hard-currency denominated
debt. The Fund’s biggest losers were Venezuela, Mexico, and Brazil, also in hard-currency denominated debt.
We continue to prefer hard-currency over local-currency debt and we
have no Russia-/Ukraine-related exposure. We have selective exposure
to duration in steep credit curves of high-rated sovereigns.
Russia-Ukraine geopolitics continued to be unstable in September, with the Russian
macroeconomic backdrop weakening. The ceasefire announced last
month seems uncertain, with reports of fighting in Eastern Ukraine
conflicting with overtures of cooperation and negotiation. Ukraine’s
parliamentary elections in late October could put strain on President
Poroshenko’s position, and colder weather now brings concerns
about natural gas supplies. We believe a notable – and worrisome
– recent development is that Moscow’s official talk
about the former Soviet republics has become more militant. In our
view, Russian sanctions are expected to continue at current levels,
and could have further negative impact on the already weak Russian
economy, especially on Russian companies’ and banks’ ability to roll
over their debt. Additionally, multiple-uses-of-reserves is a potential
growing risk. As of the end of September, reserves had decreased by
11% for the year. This has been further exacerbated by a ramp up in
recent days. As such, the current upside/downside balance for Russia-
and Ukraine-related assets continues to look unattractive.
The result of our investment process to own hard-currency denominated
debt over local-currency debt has been reinforced by weaker
global growth and lower commodity prices. Although emerging
markets Purchasing Managers Indices remain in expansionary
territory on average, growth indicators have been slowing across both
emerging markets and developed markets economies. Lower growth
across regions would likely drive commodity prices lower. Eurozone data continued to be weak, with German industrial production
posting its sharpest decline since the 2008/2009 crisis (-4.0%
month-on-month in August). This is negative for emerging markets
currencies, but positive for duration. U.S. Treasuries were further
anchored by historically low Japanese Government Bond and
German Bund levels.
During the month we selectively positioned ourselves in high-rated
steep sovereign curves. In high-rated countries such as Mexico, Peru,
Colombia, Israel, and to a lesser extent, the Dominican Republic
and Indonesia, we found potential opportunities to position the Fund
defensively to seek to benefit from steep curves. High ratings mean
they may benefit from U.S. Treasury rallies. Our investment process
drives these conclusions because of attractive pricing for strong fundamentals,
as well as strong signals from our various portfolio tests,
including a test for “vulnerability,” which, for example, measures the
impact of short-term external financing pressures.
Read full September Commentary >>
Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Strategy
View now »
Eric Fine and Natalia Gurushina
Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team
Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund
Improvements in economic policies, strong balance sheets and improved creditworthiness of local governments continue to foster a strong case for investment in the emerging markets bonds.
Emerging Market Bonds Defined
“Emerging Markets Hard Currency Bonds” are bonds denominated in foreign currencies that are generally widely accepted around the world (such as the US Dollar, Euro or Yen).
“Emerging Markets Local Currency Bonds” are bonds denominated in the local currency of the issuer.
“Emerging Markets Sovereign Bonds” are bonds issued by national governments of emerging countries in order to finance a country's growth.
“Emerging Markets Quasi Sovereign Bonds” are bonds issued by corporations domiciled in emerging countries that are either 100% government owned or whose debts are 100% government guaranteed.
“Emerging Markets Corporate Bonds” are bonds issued by non-government owned corporations that are domiciled in emerging countries.
Long term, an allocation to emerging markets bonds may provide diversification benefits as emerging markets fixed income tends to be less correlated to developed market fixed income.
Unless otherwise stated, portfolio facts and statistics are shown for Class A shares; other classes may have different characteristics.
†NAV: Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Fund is the Net Asset Value (NAV) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase. No sales charge is imposed where Class A or Class C shares are issued to you pursuant to the automatic investment of income dividends or capital gains distribution. It is the responsibility of the financial intermediary to ensure that the investor obtains the proper “breakpoint” discount. Class C, Class I and Class Y do not have an initial sales charge; however, Class C does charge a contingent deferred redemption charge. See the prospectus and summary prospectus for more information.
1Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.25% for Class A, 1.95% for Class C, 0.95% for Class I, and 1.00% for Class Y of the Fund’s average daily net assets per year until May 1, 2015. During such time, the expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation.
2The J.P. Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM) tracks local currency bonds issued by Emerging Markets governments. The index spans over 15 countries. The J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI) tracks returns for actively traded external debt instruments in emerging markets, and is also J.P. Morgan’s most liquid U.S-dollar emerging markets debt benchmark.
3Average Yield to Worst measures the lowest of either yield-to-maturity or yield-to-call date on every possible call date. Effective duration takes into account that expected cash flows will fluctuate as interest rates change. Effective maturity is the length of time until a fixed income investment returns its original investment. Distribution Yield is the amount of cash flow paid out and is calculated by dividing the annual income (interest or dividends) by the current price of the security. Averages are market weighted. These statistics do not take into account fees and expenses associated with investments or the Fund.
The views and opinions expressed are those of Van Eck Global. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.
You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with its investments in emerging markets securities. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currencies, changes in currency exchange rates may negatively impact the Fund’s return. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. The Fund may also be subject to credit risk, interest rate risk, sovereign debt risk, tax risk, non-diversification risk and risks associated with non-investment grade securities. Please see the prospectus and summary prospectus for information on these and other risk considerations.
Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. Bond and bond funds will decrease in value as interest rates rise. The prospectus and summary prospectus contain this and other information. Please read them carefully before investing.
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